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Companies should think carefully before they go through with wholesale retrenchments of their middle managers and staff in non-transactional areas, a recent report has found.

Australian companies are turning to job cuts as part of their cost-saving strategies to survive the financial crisis, however, companies have a poor understanding of the contribution by their middle managers and indirect support areas to overall business performance, said David Hand, managing director of Newport Consulting and author of the report, Operational Excellence. Smart Business. Unlocking high business performance in difficult times.

“One of the greatest risks to a business’s human resource capital is to downsize their middle management and support areas when their direct link to output and operational excellence is not fully understood,” he said.

“Senior executives and company directors need to understand the role of their company’s middle managers and that of their human resources in non-transactional areas, which are often the first to go in any company downsizing or restructure.”

Middle managers occupy a vital position that is linked to driving operational excellence, he said. Along with support areas, knowledge, history and process, expertise lies with middle management.

“So to manage those resources effectively is critical to enhancing productivity, improving efficiency and surviving these difficult times,” Hand said.

His top tips for getting the most out of middle managers and people in non-transactional roles are:

1. Employ and encourage an active management style. Provide your managers with the training, support and tools required for them to get the most from their respective teams. This will benefit both middle managers and frontline staff in non-transactional areas.

2. Implement good key performance indicators (KPIs). KPIs need to be business-focused; not individual performance focused. You don’t want a manager who hits all targets when the business overall has failed. KPIs are also just as appropriate for areas of a business such as marketing and training. They will bring a sense of focus and measurement to what is considered traditionally non-process driven areas.

3. Introduce and have people commit to deadlines in advance. Hold people in support areas accountable to deadlines. If they miss a due date and it was because the target was over-optimistic, that is a learning experience for everyone and your estimating will improve. It is far better to have a deadline and miss it than to not have one at all.

4. Promote a problem-solving culture. If an error or mistake has been made, rather than finding and penalising the person responsible, focus on resolving the problem and make changes designed to stop it happening again. This way, people can learn from mistakes and improve their performance from first-hand experience.